**Contents**     **Section 1—Establishment of the Plan**  **1** 1.01 Purpose  1 1.02 Effective Date  1 **Section 2—Definitions**  **1** 2.01 Accrued Incentive Awards  1 2.02 Adjusted Cash Flow Return (ACFR)  1 2.03 Average Accumulated Amortization  2 2.04 Average Accumulated Depreciation  2 2.05 Average Assets  2 2.06 Average Non-Interest Bearing Current Liabilities  2 2.07 Award Payment  3 2.08 Award Percentage  3 2.09 Board  3 2.10 Cash Flow Return (CFR)  3 2.11 Current Taxes  4 2.12 CEO  4 2.13 Committee  4 2.14 Corporation  4 2.15 Depreciation and Amortization  4 2.16 Eligible Employee  4 2.17 Entitled Employee  4 2.18 Hourly Employee  5 2.19 Non-recurring/Unusual Items  5 2.20 Operating Income  5 2.21 PCS Inc.  5 2.22 Plan  5 2.23 Salary  5 2.24 Target CFR  5 2.25 Target Percentage  5 2.26 Unrealized Gains/Losses on Derivative Instruments Included in Net Income  6 2.27 Year  6 **Section 3—Participation**  **6** 3.01 Participation Requirements  6 **Section 4—Award Payments**  **6** 4.01 Eligibility  6 4.02 Calculation of Award Payment  6 4.03 Entitled Operations Employees  7 4.04 Limitation of Award Payments and General Discretion  7 4.05 Timing of Award Payments  8 4.06 Recoupment Policy  8 **Section 5—Administration of the Plan**  **8** 5.01 Administration  8 
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     **Section 6—Transfer of Employment**  **9** 6.01 Transfer of Employment  9 **Section 7—General Provisions**  **9** 7.01 Assignment or Alienation  9 7.02 Amendment or Termination  9 7.03 Effect of Amendment or Termination  9 7.04 No Enlargement of Contractual Rights  10 7.05 Interpretation  10 7.06 Withholding of Taxes  10 7.07 Binding on Successors  10 7.08 Currency  10 **Appendix “A”—Award Percentage**  **11** 
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**Section 1—Establishment of the Plan****1.01** **Purpose**   This Annual Incentive Plan is established for the purpose of rewarding eligible employees onan annual basis for their efforts and contributions in the attainment of certain performancemeasures that contribute materially to the success of the business interests of PotashCorporation of Saskatchewan Inc. **1.02** **Effective Date**   Subject to Section 7.02 (Amendment or Termination), this Plan shall be effective on andafter January 1, 2000.   The amendments made to the Plan effective April 30, 2007, including the addition of allpermanent salaried employees, shall only be effective on and after April 30, 2007.   The amendments made to the Plan effective January 1, 2008, including the addition of allpermanent Canadian and US Hourly Employees, shall only be effective on and after January 1,2008.   The amendments made to the Plan effective January 1, 2009, including the addition ofspecified Trinidad Employees with jobs valued at Hay Point Level 366 up to Hay Point Level774, and all PCS Sales employees with jobs valued at Hay Point Level 775 and above who werenot previously eligible shall be included in this Plan effective on and after January 1,2009.**Section 2—Definitions**The following terms, when capitalized, shall be defined as follows:**2.01** **Accrued Incentive Awards**   “Accrued Incentive Awards” means the amounts accrued during the Year that represent expectedpayments under this Plan, the Medium Term Incentive Plan, and other group incentive plans asappropriate. **2.02** **Adjusted Cash Flow Return (ACFR)**   “Adjusted Cash Flow Return” or “ACFR” means an amount derived from the following formula:                  ACFR = (CFR divided by Target CFR) multiplied by 100,   and used in the table in Appendix “A” to calculate an Entitled Employee’s Award Percentagefor a given Year.
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**2.03** **Average Accumulated Amortization**   “Average Accumulated Amortization” means the average consolidated accumulated amortizationof PCS Inc. during a given Year, calculated by dividing (a) by (b) where: (a) equals the sum of the consolidated accumulated amortization ofPCS Inc. at the beginning of the Year, the consolidated accumulatedamortization of PCS Inc. at the beginning of the second quarter of the Year,the consolidated accumulated amortization of PCS Inc. at the beginning of thethird quarter of the Year, the consolidated accumulated amortization of PCSInc. at the beginning of the fourth quarter of the Year and the consolidatedaccumulated amortization of PCS Inc. at the end of the Year; and,  (b) equals five (5).**2.04** **Average Accumulated Depreciation**   “Average Accumulated Depreciation” means the average consolidated accumulated depreciationof PCS Inc. during a given Year, calculated by dividing (a) by (b) where: (a) equals the sum of consolidated accumulated depreciation of PCSInc. at the beginning of the Year, the consolidated accumulated depreciation ofPCS Inc. at the beginning of the second quarter of the Year, the consolidatedaccumulated depreciation of PCS Inc. at the beginning of the third quarter ofthe Year, the consolidated accumulated depreciation of PCS Inc. at thebeginning of the fourth quarter of the Year and the consolidated accumulateddepreciation of PCS Inc. at the end of the Year; and,  (b) equals five (5).**2.05** **Average Assets**   “Average Assets” means the average book value of PCS Inc.’s consolidated assets during agiven Year, calculated by dividing (a) by (b) where: (a) equals the sum of the book value of the consolidated assets ofPCS Inc. at the beginning of the Year, the book value of the consolidatedassets of PCS Inc. at the beginning of the second quarter of the Year, the bookvalue of the consolidated assets of PCS Inc. at the beginning of the thirdquarter of the Year, the book value of the consolidated assets of PCS Inc. atthe beginning of the fourth quarter of the Year and the book value of theconsolidated assets of PCS Inc. at the end of the Year; and,  (b) equals five (5).**2.06** **Average Non-Interest Bearing Current Liabilities**   “Average Non-Interest Bearing Current Liabilities” means the average consolidatednon-interest bearing current liabilities of PCS Inc. during a given Year, calculated bydividing (a) by (b) where:
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 (a) equals the sum of the consolidated non-interest bearing currentliabilities of PCS Inc. at the beginning of the Year, the consolidatednon-interest bearing currentliabilities of PCS Inc. at the beginning of the second quarter of the Year, theconsolidated non-interest bearing current liabilities of PCS Inc. at thebeginning of the third quarter of the Year, the consolidated non-interestbearing current liabilities of PCS Inc. at the beginning of the fourth quarterof the Year and the consolidated non-interest bearing current liabilities of PCSInc. at the end of the Year; and,  (b) equals five (5).**2.07** **Award Payment**   “Award Payment” means a cash payment to an Entitled Employee calculated pursuant to Section4 (Award Payments). (a) Corporate Award Payment is the payment calculated based upon the Corporate ACFRmeasure of CFR relative to Target CFR.  (b) Operations Award Payment is the payment calculated based upon operationsperformance factors as established in accordance with Section 4.03 for the benefit ofEntitled Operations Employees.**2.08** **Award Percentage**   “Award Percentage” means the percentage of an Entitled Employee’s Salary derived from thetable contained in Appendix “A”. The Award Percentages applicable to an Entitled Employee,as set out in the table in Appendix “A”, shall be recommended by the CEO and approved by theCommittee. **2.09** **Board**   “Board” means the Board of Directors of PCS Inc. **2.10** **Cash Flow Return (CFR)**   “Cash Flow Return” or “CFR” means the amount derived from the following formula: (a) Operating Income, plus/minus    Non-recurring/Unusual Items, plus/minus    Change in Unrealized Gains/Losses on Derivative Instruments Included in NetIncome, plus    Accrued Incentive Awards, plus    Depreciation and Amortization, minus    Current Taxes**DIVIDED BY**
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 (b) Average Assets (plus/minus the fair value adjustment forinvestments in available-for-sale securities and minus the fair value ofderivative instrument assets), plus    Average Accumulated Depreciation, plus    Average Accumulated Amortization, minus    Average cash and cash equivalents, minus    Average Non-Interest Bearing Current Liabilities, excluding Derivatives,  and used in the table at Appendix “A” to calculate an Entitled Employee’s Award Percentagefor a given Year. **2.11** **Current Taxes**   “Current Taxes” means the current income taxes accrued for a given Year, less provision fordeferred income taxes as set out in the audited consolidated financial statements of PCSInc. for that Year. **2.12** **CEO**   “CEO” means the Chief Executive Officer of PCS Inc. **2.13  Committee**   “Committee” means the Compensation Committee of the Board. **2.14  Corporation**   “Corporation” means Potash Corporation of Saskatchewan Inc. and its direct and indirectsubsidiaries. **2.15** **Depreciation and Amortization**   “Depreciation and Amortization” means the depreciation and amortization expense for a givenYear, as set out in the audited consolidated financial statements of PCS Inc. for that Year. **2.16** **Eligible Employee**   “Eligible Employee” means an employee, including an Hourly Employee, who has satisfied theeligibility requirements set out in Section 4.01 (Eligibility). **2.17** **Entitled Employee**   “Entitled Employee” means an Eligible Employee who is recommended by the CEO and approved bythe Committee to participate in this Plan. **(a)** **Entitled Operations Employee**    “Entitled Operations Employee” means an Entitled Employee who is attached to one ofthe operating facilities of PCS Inc. or its direct or indirect subsidiaries.
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**2.18** **Hourly Employee**   “Hourly Employee” means an employee employed at either a Canadian or U.S. operation who ispaid on an hourly wage rate basis, including both employees who are and who are not coveredby a collective bargaining agreement. **2.19** **Non-recurring/Unusual Items**   “Non-recurring/Unusual Items” means exceptional transactions that are considerednon-routine, unique, and not expected to be repeated in a normal course of the Corporation’soperating cycle. Such items may result in a measurable charge or increase to income and mayor may not be triggered by a management decision. **2.20** **Operating Income**   “Operating Income” means the operating income for a given Year, as set out in the auditedconsolidated financial statements of PCS Inc. for that Year. **2.21** **PCS Inc.**   “PCS Inc.” means Potash Corporation of Saskatchewan Inc. **2.22** **Plan**   “Plan” means this Annual Incentive Plan, as amended from time to time. **2.23** **Salary**   “Salary” means: (a) For Entitled Employees who are exempt from the overtime requirements of U.S.wage and hour legislation, other than Canadian Hourly Employees, the annual base salaryin effect at the end of a given Year.  (b) For Entitled Employees who are Canadian Hourly Employees, the actual total basepay for the given Year, excluding, but not limited to, overtime, bonuses, shiftdifferentials and premiums.  (c) For Entitled Employees who are U.S. employees and who are non-exempt from theovertime requirements of U.S. wage and hour legislation, total earned income, includingovertime and shift differentials, for the given Year.**2.24** **Target CFR**   “Target CFR” means the CFR projected in the annual budget approved by the Board and used inthe table at Appendix “A” to calculate an Entitled Employee’s Award Percentage for a givenYear. **2.25** **Target Percentage**   “Target Percentage” means the percentage assigned to the Tier Level for Entitled Employeeswithin that Tier, as shown in the table contained in Appendix “A”.
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**2.26** **Unrealized Gains/Losses on Derivative Instruments Included in Net Income**   “Unrealized Gains/Losses on Derivative Instruments Included in Net Income” means the mark tomarket adjustments on the company’s derivative instrument assets and liabilities, includingbut not limited to, natural gas non-hedging and foreign exchange non-hedging, that arerequired to be recognized under accounting standards for reporting purposes. **2.27** **Year**   “Year” means the fiscal year of PCS Inc.**Section 3—Participation****3.01** **Participation Requirements**   Participation in the Plan is limited to Eligible Employees.**Section 4—Award Payments****4.01** **Eligibility**   A full-time permanent employee of the Corporation who: a) is employed for at least three months during a Year, and who is in the employof the Corporation at the end of a Year, and  b) who is not a participant in another annual cash bonus plan sponsored by theCorporation for the same period during the Year as covered by this Plan  shall become an Eligible Employee. **4.02** **Calculation of Award Payment**   Subject to Section 4.04 (Limitation of Award Payments and General Discretion), an EntitledEmployee, other than Entitled Operations Employees, shall receive an Award Payment equal tothe Entitled Employee’s Award Percentage multiplied by his or her Salary. a) The Corporate Award Percentage is calculated as follows:   If ACFR equals or exceeds 50% and up to 100%, the calculation is:              Target Percentage X ACFR = Corporate Award Percentage    If ACFR exceeds 100% and up to 150%, the calculation is:
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   (Two times the Target Percentage multiplied by ACFR) minus Target Percentage =Corporate Award Percentage b) The individual Award Payment calculated in accordance with this Section 4.02 issubject to an adjustment of plus or minus 30% depending upon the Entitled Employee’sjob performance, as determined by his or her supervisor, and approved in accordancewith the provisions of this Plan.  c) No Corporate Award Percentage is calculated for ACFR less than 50% and forCorporate Award Percentage calculations, ACFR is limited to 150%.**4.03** **Entitled Operations Employees**   Subject to Section 4.04 (Limitation of Award Payments and General Discretion), an EntitledOperations Employee shall be entitled to an Award Payment equal to the sum of paragraphs (a)and (b) below: (a) the award calculated pursuant to Section 4.02 (Calculation of Award Payment),divided by two (2); and,  (b) an amount equal to the Target Percentage of the Salary of the EntitledOperations Employee, adjusted by applying a formula to be developed from time to timeby the CEO in consultation with the Senior Vice-President, Administration and theappropriate subsidiary President which formula shall reasonably reflect the actualresults of the operating facility to which the employee is attached compared to theapproved target for that operating facility, subject to achieving a threshold of atleast 25% of the operating facility’s targets, and thereafter dividing such amount bytwo (2).  (c) The total individual Award Payment calculated in accordance with this Section4.03, other than for Hourly Employees, is subject to an adjustment of plus or minus 30%depending upon the Entitled Employee’s job performance, as determined by his or hersupervisor, and approved in accordance with the provisions of this Plan.  (d) There will be no adjustment for job performance for Entitled OperationsEmployees who are Hourly Employees.**4.04** **Limitation of Award Payments and General Discretion** (a) Generally, no Award Payment shall be granted under this Plan with respect toany Year in which the CFR is less than 50% of the Target CFR. However, the Committeemay elect, in its discretion, to grant Award Payments in any Year, regardless of theCFR.  (b) The Award Payment for any Entitled Employee may exceed or be below the amountcalculated in accordance with this Section 4. Award Payments falling outside theestablished range shall be reviewed and approved by the Board and Committee for the CEOand the CEO and Committee for direct reports to the CEO. For all others, approval ofthe CEO is required.
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 (c) An Entitled Employee who has been employed by the Corporation for less than oneyear shall have his or her Award Payment prorated in accordance with his or her periodof employment.  (d) An employee who for part of the Year was a full-time active employee but forpart of the Year was on long-term disability or an approved or unpaid leave of absence,may be considered an Entitled Employee and eligible for a pro-rata share of the AwardPayment based upon the fraction of the Year the employee was considered a full-timeactive employee. However, in situations where the fractional portion of the Yearworked is less than one-twelfth, the employee will not be considered an EntitledEmployee unless the CEO recommends and the Committee approves the exception.  (e) An Entitled Employee who was, during a Year, promoted or demoted from one Groupto another Group set forth in Appendix “A”, shall have his or her Award Paymentcalculated on the basis of his or her Group as at the end of the Year.  (f) Notwithstanding the Groups established in Appendix “A”, the Committee may onthe recommendation of the CEO, designate an Eligible Employee for inclusion in one ofsuch Groups when, but for such designation, the Eligible Employee would not otherwisebe included in such Group.**4.05** **Timing of Award Payments**   The Committee shall, on the recommendation of the CEO and within 30 days of the end of aYear, approve the ACFR calculation and the amount of Award Payments for each EntitledEmployee who is a direct report to the CEO for any given Year. The CEO’s Award Payment willbe approved by the Board. Following approval of the ACFR, final calculations for theremaining Entitled Employees will be prepared. The Award Payments shall be paid to EntitledEmployees within 30 days of the Committee’s approval of the ACFR and no later than 2 1/2months after the end of the Year. **4.06** **Recoupment Policy**   Notwithstanding any other provision under this Section, Entitled Employees who alsoparticipate in the Corporation’s Medium-Term Incentive Plan shall be subject to the termsand conditions of the Corporation’s Policy on Recoupment of Unearned Compensation (aspreviously adopted and, from time to time, amended by the Board), a copy of which shall bedistributed to each such Entitled Employee upon participation in the Medium-Term IncentivePlan.**Section 5—Administration of the Plan****5.01** **Administration**   The Committee shall conclusively interpret the provisions of this Plan and decide allquestions of fact arising in the application of the Plan. Determinations and interpretationsin individual cases may be made by the CEO with due regard to consistency with any prioraction by the Committee and such determination shall be binding and conclusive upon the
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  individual employees concerned and persons claiming under them. The Committee shall beadvised of any such determination or interpretation made by the CEO. To the extentapplicable, the Plan shall be administered with respect to Entitled Employees subject toU.S. law so as to avoid penalties pursuant to Section 409A of the Internal Revenue Code.**Section 6—Transfer of Employment****6.01** **Transfer of Employment**   If an Entitled Employee’s employment is transferred during a Year to a different location,within the Corporation the Senior Vice-President, Administration and the CEO shall determinewhether the Entitled Employee’s Award Payment is calculated in accordance with Section 4.02(Calculation of Award Payment), Section 4.03 (Entitled Operations Employees), or acombination of those sections.**Section 7—General Provisions****7.01** **Assignment or Alienation**   Except as required by applicable laws, the right of an Entitled Employee to receive an AwardPayment under this Plan shall not be: (a) given as security;  (b) subject to transfer, anticipation, commutation, alienation, sale, assignment,encumbrance, charge, pledge, or hypothecation; or  (c) subject to execution, attachment, levy or similar process or assignment byoperation of law,  and any attempt to effect any such action shall be null and void and of no effect. **7.02** **Amendment or Termination**   Subject to Section 7.03 (Effect of Amendment or Termination), this Plan may be amended inwhole or in part from time to time or terminated by the Corporation. Any amendment ortermination shall be binding on the Corporation, Entitled Employees, Eligible Employees andtheir respective beneficiaries. **7.03** **Effect of Amendment or Termination**   Notwithstanding Section 7.02 (Amendment or Termination), no amendment or termination of anyprovision of this Plan shall directly or indirectly deprive any Entitled Employee orbeneficiary of all or any portion of an Award Payment earned with respect to any Year endingprior to the date of the amendment or termination.
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**7.04** **No Enlargement of Contractual Rights**   This Plan shall not give any Entitled Employee or Eligible Employee the right to be retainedin the service of the Corporation nor shall it interfere with the right of the Corporationto terminate the employment of the Entitled Employee or Eligible Employee. Participation inthis Plan shall not give any Entitled Employee or Eligible Employee any right or claim toany benefit, except to the extent provided in this Plan. **7.05** **Interpretation**   This Plan shall be interpreted pursuant to the laws of the Province of Saskatchewan. Sectionheadings are for convenience only and shall not be considered provisions of the Plan. Wordsin the singular shall include the plural, and vice versa, unless qualified by the context. **7.06** **Withholding of Taxes**   The Corporation shall withhold all applicable taxes from any amounts paid pursuant to thisPlan. **7.07** **Binding on Successors**   This Plan shall be binding on any successor or successors of PCS Inc. whether by merger,consolidation or otherwise. **7.08** **Currency**   The benefits payable pursuant to this Plan shall be paid in the same currency as theEntitled Employee receives his or her Salary.
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**Appendix “A”—Award Percentage**                                      **Award**   **Award**        **Percentage When** **Award Percentage** **Percentage at**        **CFR is Less** **When CFR Equals** **Maximum**    **Target** **Than Target** **or is Greater Than** **CFR (150% of****Tier** **Group** **Percentage** **CFR** **Target CFR** **Target CFR)**1 Corporate President,